Writing a Business Plan

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<your logo here>

<Business Name>

Business Plan

<Business Address>

Prepared By:<Your Name>

Table of Contents

1.Business Summary

1.1Business Overview

1.2Product/Service Features

1.3Location

1.4Market Analysis

1.5Market Strategy

1.6Key Financial Objectives

1.7Business Structure

1.8Management & Ownership

1.9Key Objectives

2.Detailed Plan

2.1Target Market/Customer Analysis

2.2The Competitor

2.3Product/Service

2.4Product or Service Production

2.5SWOT Analysis

3.Financial plan

3.1Key Objectives and Financial Review

3.2Establishment Costs

3.3Income Projection Statement (Profit and Loss)

3.4Cash Flow

3.5Balance Sheet

3.6Break-even analysis

4.Supporting Documentation

5.Action Plan

  1. Business Summary

1.1Business Overview

The overview should provide the reader with a clear summary of what your business does or will do. In no more than a page, it should briefly answer the following questions:

  • What does your business do and how long has it been operating?
  • What industry is it in?
  • What sets your business above your competitors, e.g. different location, cheaper price, better service?

Outline the products or services, who will buy them, where you feel the business will be in two to five years and how this will be achieved?

1.2Product/Service Features

What are the main benefits of your product or service? In this section, summarise what makes your offering special from your customers’ point of view.

Describe:

  • What you are selling.
  • How your product or service will benefit the consumer.
  • The demand for your products and services – will they create a steady cash flow?
  • What makes your product or service different or unique?

1.3Location

Your choice of location can mean the difference between the success or failure of your business. If your business depends on personal contact with your customers, your premises should be easy to reach and provide a sense of security. If you’re relying on passing trade, you should estimate pedestrian traffic around your chosen location and design your opening hours to cater to their needs.

Consider:

  • What type of people pass your shopfront? Will they be interested in your product or service?
  • What kind of space will you need?
  • Is the area desirable? Is the building desirable?
  • Is it easily accessible? Is public transport available? Is street lighting adequate? Can you offer customer parking?
  • Is the area experiencing any market shifts or demographic shifts you should be aware of?

1.4Market Analysis

Marketing plays a vital role in successful business ventures. How well you market your business, along with a few other considerations, will ultimately determine your degree of success or failure. Key information includes:

  • Briefly outline what market the product or service is going to be aimed at and why?
  • Are these markets growing, remaining constant or declining?
  • Will your market share grow, remain constant or decline?
  • If your business is a franchise, how is your market segmented?
  • Are your target markets large enough to support your expansion?
  • How will you attract, hold and increase your market share? If you are a franchise, will the franchiser provide assistance in this area?
  • What is your pricing strategy?
  • What research is there to support your business expectations?

1.5Market Strategy

It is essential to show that there is a sound customer base for the business.

  • How you have carried out your customer and market research? Include where you got your information from.
  • What unique selling proposition (USP) do you have that you expect your customers to respond to?

For more information about USPs and Guarantees, please see our video on ‘Marketing your business’.

1.6Key Financial Objectives

Effective financial management requires you to plan a sound, realistic budget for your business. If you’re starting a new business, first devise a start-up budget. This will include one-off costs like official registration, major equipment, rental and utility bond payments. Your operating budget then estimates how much it will cost to keep it open.

Summarise the key information contained in the financial plan here:

  • What major investments will be required to get your business off the ground?
  • When will you begin to break even?
  • What financial data have you based your estimates on? Is there comparable industry data to back them up?

1.7Business Structure

When choosing your ownership structure, it’s important to weigh up the risks and costs of the available options. You can find more information on business structures here. Provide a clear description of the ownership structure and why you’ve chosen it – e.g. sole trader, partnership, company (this should include your exit strategy). Also outline other ways you'll protect your business, e.g. trademarks, patents, registering a website address.

1.8Management & Ownership

Though they can’t be listed on the balance sheet, people are the chief asset in any business. Your experience and expertise, together with that of your management team, staff and contractors, are the key value adders in your business. Provide the following information about yourself and your team:

  • What specialised skills and expertise are you and your people bringing into the business?
  • What other relevant experience does your team have?
  • What will each person in the team be responsible for?
  • What other staff or contractors will be required? How much will they get payed?

1.9Key Objectives

Listing your key objectives gives the readers of your business plan an insight into where you’re taking your business and what you’re measuring your success or failure against. Make sure your objectives can be proven and measured. Click here for more information about developing your key objectives for success.

Your key objectives should be SMART:
Specific, Measurable, Achievable, Realistic, Timely.

Your key objectives should describe what you want to achieve in each functional business area. For example:

  • Financial targets – To achieve a 5% increase in net profit over the next 6 months.
  • Sales targets – To sell 100 units per week for the next 6 months.
  • HR targets – To build your team to 3 people over the next 6 months.
  • Customer satisfaction – To maintain and expand your reputation for high quality service and sales by creating an internal training and skills development program for staff.

  1. Detailed Plan

2.1Target Market (Customer Analysis)

Identify your target market(s) and describe your customers. Reference any research findings which back up your choice of segments. It is essential to show that there is a sound customer base for the business. Explain how you have carried out your customer and market research, including information sources. This should include the unique selling proposition you expect your customers to respond to.

There are a number of resources you can use to find out more about your customers and prospects. A good place to start is the Australian Bureau of Statistics website, where you can find lots of information sorted by demographic and geographical location.

  1. How old are your customers?
  2. Are they male or female, or both?
  3. What level are they educated to?
  4. Where do they live?
  5. What do they earn?
  6. How much of their income is disposable?

2.2The Competitor

Outline your known direct and indirect competitors and how you'll position your product or service against them. Knowing who your competition is can be as important as knowing your own product.

Ask yourself:

  1. Who are your five nearest direct competitors?
  2. Who are your indirect competitors? (These are businesses which might not produce the same product or service as you, but could reduce your market share with an alternative offering.)
  3. How are their businesses developing? Are they steady? Increasing? Decreasing?
  4. What have you learned from their operations? From their advertising?
  5. What are their strengths and weaknesses?
  6. How do you compare on:
  • Pricing?
  • Product?
  • Promotion?
  • Distribution?

2.3Product/Service

Define and describe the product or service that you’re offering and how it will be displayed or made available to best appeal to your customers. Discuss:

  • Branding
  • Packaging (where applicable)
  • Ongoing product or service development
  • Any other important characteristics

What are their features and their benefits, and how do they compare to the major competitors?

Ask yourself how your products and/or services are going to appeal to your target market and how much of it you’ll be able to sell.

  1. What is it?
  2. How much does it cost? How much are you going to charge for it?
  3. How does it add value to customers’ lives?
  4. Is it a necessity or a discretionary purchase?
  5. How much of it are people likely to buy and at what intervals?
  6. Is there potential to grow the market by developing the product or service offering?

2.4Product or Service Production

Describe how your product(s) or services(s) are being produced and costed.

  • Are they being manufactured? Bought in? Break down service charges and import costs.
  • Why are the product(s) or services(s) being produced and costed the way they are?

Include your business dealings with your supplier/s.

Your pricing strategy is another marketing technique you can use to give yourself a competitive edge. Get a feel for the prices your competitors are offering. Determine whether your prices are in line with competitors in your market area and in line with industry averages.

Some pricing strategies are:

  • Parity pricing (offering a similar price to your competitor)
  • Pricing below competition
  • Pricing above competition
  • Service margins as a percentage of the costs of:

- Service components

- Material costs

- Labour costs

- Overhead costs

A price/quality matrix will help you to review your competitors’ pricing strategies. Determine which of the strategies they use, if it is effective and why it is effective.

Price/Quality / High / Medium / Low
High / ‘Rolls Royce’ strategy / ‘We try harder’ strategy / ‘Best buy’ strategy
Medium / ‘Outperforms’ strategy / ‘Piece of the rock’ strategy / ‘Smart shopper’ strategy
Low / ‘Feature packed’ strategy / ‘Keeps on ticking’ strategy / ‘Bargain hunter’ strategy

PRICE/ QUALITY MATRIX
SALES APPEALS

2.5SWOT Analysis

A SWOT (strengths, weaknesses, opportunities and threats) analysis should give direction to the business and its marketing strategies.

Describe your businesses strengths, weaknesses, etc, and what each means to the direction and tactical running of the business.

  • Strengths are the things you do best and which give you an advantage over your competition.
  • Weaknesses are areas of the business that need to be acted on.
  • Opportunities show the marketplace areas that can be built on.
  • Threats are issues that could affect the success of the business.

Strengths / Weaknesses
Central location
Competitively priced
Large knowledge base
/ New to the area
Unfamiliar business to locals
Opportunities / Threats
Offer discounts to near-by University staff and students
Aggressive advertising
Online marketing / Interest rate rises will curb spending by families/employees
Not keeping on top of latest trends and technology developments
Nearest specialised competitor shop is only 1.5km away
  1. Financial plan

3.1Key Objectives and Financial Review

Getting your financials straight is a crucial step in starting or maintaining the operations and profitability of your business.

List the key objectives that are essential for your business to achieve. Explain the basic financial needs of the business, starting with the initial capital, your expected income and your expected cash needs.

Define what your near term and long term financial goals are. Specify the time period in which you expect to achieve each goal. Your goals should be as realistic as possible and take into account any loans you have taken on to finance the business.

For example:

Sales & Marketing:

  • To achieve sales in the first quarter of $150,000.
  • To achieve sales in the second quarter of $200,000.
  • To achieve 30% market share in the first two years.

Finance:

  • To reduce the overdraft from $250,000 to $150,000 over the first two quarters.
  • To reduce bank loan repayment interest rate from 10% to 7.5%.

3.2Establishment Costs

Before you make the decision to start a business, you may need to incur costs for research, location scouting, building inspections, purchase partner meetings and the like. Record what you have spent or expect to spend below.

3.3Income Projection Statement (Profit and Loss)

The income projection (profit and loss) statement is valuable as both a planning tool and a key management tool to help control business operations. It enables the owner/manager to develop a preview of the amount of income generated each month and for the business year, based on reasonable predictions of monthly sales, costs and expenses. A completed income statement allows the owner/manager to compare actual figures with monthly projections and to take steps to correct any problems.

Prepare this statement on a month by month basis, using the actual figures to adjust your forecast figures and include the establishment costs you listed above.

It is important not to overestimate the sales revenue and underestimate the costs. Give careful thought to the headings, particularly the expenses. Expand the sales revenue and expenses area if your business has distinct categories. You can download an Income Projection Statement Template for your business here.

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3.4Cash Flow

A cash flow statement will reflect how much money is required to set up and start the business, and is critical to getting future finance. It will show how much cash is available after all the bills have been paid. You need to explain where the money will be coming from. You can download a Cash Flow Forecast Template for your business here.

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3.5Balance Sheet

A Balance Sheet brings together the results from the Profit & Loss Statement and the Cash Flow Statement. The Balance Sheet gets its name from its key characteristic: it always balances. The equation which describes this is: Assets = Liabilities + Owners’ Equity. You can download a Balance Sheet Template for your business here.

3.6Break-even analysis

Your break-even point is the amount of money you need to make on sales to cover your fixed costs. The hardest part of a break-even analysis is figuring out which of your costs are fixed and which are variable. Some costs are a combination of both. In this case you’ll need to work out how much of the cost is fixed.

For example, having one staff member in your shop during opening hours is a fixed cost. They’re there whether or not you have any customers. But casual staff are a variable cost. You only roster and pay them when you expect to make more sales.

To calculate your break-even point, add up your fixed costs. These are the costs which don’t go down when you produce or provide less of your product or service. Refer to the Income Statement to help you decide which costs are fixed.

Once you’ve got this number, you’ve basically got your break-even point. If your gross profit margin equals your fixed costs, and you’re not making a profit or a loss, you’re breaking even. If you’ve got money left over after you’ve paid your fixed costs, that’s profit. And if you’re not covering your fixed costs, you’re operating at a loss.

If this last one is true: don’t panic! Many new businesses don’t break even for months after they start. But do be sure you’ve allowed enough start-up capital to cover this period.

Here’s an example:

Average revenue per unit or charged hourly rate: / $60
Average per unit cost: / $40
Average month’s fixed running costs: / $1000
In order to make a profit/keep afloat your company needs to have a break-even revenue of: / $3,000
Volume of sales or hourly rate needed to break even: / 50
  1. Supporting Documentation

Attach copies of all documents that support the claims or assumptions in the business plan: resumes of the owners/operators, certificates and references, licences and permits, market research details, marketing plan, product or service details, contracts or correspondence with suppliers and customers, extracts from publications, maps, marketing or other material (other statements may include financial statements, project plans, production schedules and development plans).